US President Joe Biden says the US and the European Commission are negotiating plans to allow certain critical minerals extracted or processed in the European Union to count towards requirements for the clean-vehicle tax credit in the Inflation Reduction Act (IRA).

The White House released a statement on Friday after EC President Ursula von der Leyen visited Washington to discuss the IRA, announcing the launch of the Clean Energy Incentives Dialogue. The dialogue intends to co-ordinate clean-energy incentive programmes in the US and the EU to avoid disruptions to transatlantic trade and investments.

“This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted and free of labour abuses,” the statement said.

“Co-operation is also necessary to reduce unwanted strategic dependencies in these supply chains and to ensure they are diversified and developed with trusted partners.”

The IRA plans included supporting clean-energy production and manufacturing in North America to prevent dependence on foreign countries for transport technologies, and leaders in Europe are concerned about how it would affect projects in their region.

Tesla, Enel, Solvay, EDP and Volkswagen are among the companies that have expressed an interest in benefiting from the clean energy-technology manufacturing subsidies.

The Financial Times reported that Volkswagen, Europe’s largest carmaker, will reorder its priorities, choosing a North American battery plant ahead of one in eastern Europe. It estimates it could receive $10 billion in subsidies and tax breaks over five years.

During a meeting of the European Parliament energy committee on Thursday, International Energy Agency executive director Fatih Birol said the US devised the IRA to be a part of a new industrial age.

“The world is entering a new industrial age: clean-energy technology manufacturing. Who is going to produce this?” Birol said.

Currently, China is dominating the game, producing about 75% of the world’s batteries. But due to the IRA subsidies, Birol said this market share will go down to about 55%.

Europe is in dire need of more clean-energy supply chains as it weans off Russian fossil fuels. Cheap Russian natural gas used to fuel the continent’s economic competitiveness, but energy costs will be significantly higher in the future.

“This is finished, there is no way back,” Birol said. “Therefore, in the future Europe’s energy prices will be significantly higher than for its economic competitors like the US and China.”

As a result, Birol said European industry policies must be changed, and Europe needs to analyse its supply chain to find a competitive edge.

Otherwise, he said, “the European economy will get a big hit”.

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